Corporate Governance Guidelines: Guidance and Samples

Every board can benefit from the use of corporate governance guidelines that describe why and how they operate as boards. This publication, a part of the NACD Governance Toolkit Series, provides advice and examples that can help boards formulate and improve their guidelines.

General Guidance

What is the purpose of corporate governance guidelines?

The purpose of corporate governance guidelines is to set and communicate principles and practices for board composition and operations to all interested parties. These guidelines will be particularly relevant to board members (including the CEO) whose internal operations will be largely dependent on and dictated by them. Other interested parties may include a company’s senior leaders, who regularly engage with the board (e.g., the general counsel or corporate secretary), as well as investors—a group that views corporate governance as integral to the value or liquidity of their corporate holdings.

Corporate governance guidelines typically outline a company’s standing bylaws pertaining to the board and expand on those by including other principles and practices that boards can amend over time.

Key Items—Mandatory

What key elements should be included in the guidelines (based on bylaws, stock exchange requirements, etc.)?

Items Based on Bylaws
Governance guidelines must be consistent with bylaws, which must, in turn, conform to state law. Bylaws do not change much over time; under typical state law, bylaws and bylaw amendments must be approved by a majority vote of shareholders. Company bylaws cover a variety of general topics, including the board. The section of bylaws that covers the board (often mirroring the governance section of a state’s corporation statute) typically includes the following subtopics:

• Power of board and qualification of directors
• Number of directors
• Election and term of directors
• Voting, quorum of directors, and action by the board
• Meetings of the board
• Resignations
• Removal of directors
• Newly created directorships and vacancies
• Executive and other committees of directors
• Compensation of directors
• Conflicts of interest